  <developerConceptualDocument
      xmlns="http://ddue.schemas.microsoft.com/authoring/2003/5"
      xmlns:xlink="http://www.w3.org/1999/xlink">

    <introduction>
      <para>
        A <newTerm>day count convention</newTerm> determines the amount of interest
        that accrues over a period of time for a financial instrument. It is used
        to compute the <newTerm>day count fraction</newTerm> that is multiplied
        by a coupon or notional for determining cash flow amounts. It is approximately
        equal to the time in years of the period.
      </para>
    </introduction>
    <section>
      <title>Conventions</title>
      <content>
        <para>
        The day count fraction of a time period is a quotient having numerator approximately equal to
        the number of days in the period and denominator approximately equal to
        the number of days in a year. The following table summarizes the conventions
        for the period from the date
        Y1/M1/D1 to Y2/M2/D2.
      </para>
        <table>
          <tableHeader>
            <row>
              <entry><para>Convention</para></entry>
              <entry>
                <para>Numerator</para>
              </entry>
              <entry>
                <para>Denominator</para>
              </entry>
            </row>
          </tableHeader>
          <row>
            <entry>
              <para>30U/360</para>
            </entry>
            <entry>
              <para>if D2 is 31 and D1 is 30 or 31 change D2 to 30, if D1 equals 31 change D1 to 30.</para>
            </entry>
            <entry>
              <para>360</para>
            </entry>
          </row>
          <row>
              <entry>
                <para>30E/360</para>
              </entry>
              <entry>
                <para>if D2 is 31 change D2 to 30, if D1 equals 31 change D1 to 30</para>
              </entry>
              <entry>
                <para>360</para>
              </entry>
          </row>
          <row>
            <entry>
              <para>Act/Act (ISDA)</para>
            </entry>
            <entry>
              <para>days in leap year and days not in leap year</para>
            </entry>
            <entry>
              <para>366 and 365 respectively</para>
            </entry>
          </row>
          <row>
            <entry>
              <para>Act/360</para>
            </entry>
            <entry>
              <para>days in period.</para>
            </entry>
            <entry>
              <para>360</para>
            </entry>
          </row>
          <row>
            <entry>
              <para>Act/365</para>
            </entry>
            <entry>
              <para>days in period</para>
            </entry>
            <entry>
              <para>365</para>
            </entry>
          </row>
        </table>
        <para>
          If a period contains dates both in a leap year and not in a leap year, the two fractions are added after
          calculating the respective quotients for the Act/Act (ISDA) convention.
        </para>
        <para>
          The confirmation document of the transaction typically specifies the day count convention, but there are
          some general rules. US corporate and agency issues often use 30U/360 while derivative securities
          governed by ISDA contracts are usually Act/360. Dollar denominated LIBOR swaps have 30/360 for the fixed 
          leg and Act/360 for the floating leg.
        </para>
      </content>
    </section>
    <relatedTopics>
      
      <externalLink>
        <linkText>Eclipse Software, Inc.</linkText>
        <linkUri> http://www.eclipsesoftware.biz/DayCountConventions.html </linkUri>
      </externalLink>
     
      <externalLink>
        <linkText>The International Capital Market Association (ICMA)</linkText>
        <linkUri>http://www.icma-group.org/</linkUri>
      </externalLink>
      <externalLink>
        <linkText>International Swaps and Derivatives Association, Inc. (ISDA)</linkText>
        <linkUri>http://www.isda.org/</linkUri>
      </externalLink>
      <externalLink>
        <linkText>Securities Industry and Financial Management Association (SIFMA)</linkText>
        <linkUri>http://www.sifma.org/</linkUri>
      </externalLink>
      <externalLink>
        <linkText>SWX Swiss Exchange</linkText>
        <linkUri>http://www.swx.com/</linkUri>
      </externalLink>
     
    </relatedTopics>
  </developerConceptualDocument>
